Good morning everyone.
Since SIA’s rights issue have started trading on the open market last Wednesday (13 May), I have received quite a number of questions regarding it. For the benefit of everyone, I’ve decided to compile some of the most commonly asked questions (along with my answers) in this post:
1. Will Temasek Holdings buy the rights from me if I do not exercise them?
The short answer to this is no. Temasek Holdings will buy all unexercised rights directly from SIA, and not from the retail investor.
2. What will happen if I do not exercise the rights?
Nothing will happen if you do not exercise the rights. After 28 May, the offer will lapse and the SIA rights and SIA rights MCB will be removed from your account.
3. How do I exercise my rights?
If you’ve invested in SIA via a CDP-linked brokerage account, you can exercise your rights via ATM, or via SIA’s website at https://www.singaporeair.com/rights/details. There will be no brokerage fees involved.
However, if you’ve invested in SIA via a custodian brokerage account, you can only exercise your rights within the same brokerage account, and brokerage fees (same as what you are charged for buying or selling of shares on the platform) applies.
4. When is the latest I need to exercise my rights?
You need to exercise your rights by 28 May, at 5pm.
For those who have their rights in a custodian account, I would advise you check with your brokerage firm as to when you need to exercise your rights, as I understand that different brokerage firms may have different deadlines.
Alternatively, if you’ve already decided to exercise the rights, I would advise you to do it a couple of days before the official deadline to do so.
5. Can I exercise just part of the rights, and sell off the rest?
Yes you can.
6. How do I go about selling all/part of my rights on the open market?
You can sell your rights on the open market just like you sell shares of a company. The ticker code for SIA rights is “LRDR”, and the ticker code for rights MCB is “GANR”. Do take note that brokerage fees will apply for all sell transactions.
7. How much will I get by selling off my rights?
It will depend on how much the rights are trading on the market right now – you can find out the price via the ticker code “LRDR” for SIA rights, and ticker code “GANR” for the rights MCB.
8. I already am allocated rights as a shareholder of SIA. Can I buy even more rights from the open market?
Yes you can. And the existing rights you are being entitled to will remain in your account.
Also, you can exercise the rights you’re being entitled to, along with the rights you’ve bought from the open market together in one single transaction.
9. How do I think the price movements of SIA rights and SIA rights MCB will move in the coming days?
I’m sorry I will not be able to answer that question, as there are not enough historical price movements available for me to perform technical analysis on.
As to how the price may move in the next few days, it will very much depend on the supply and demand.
10. I have bought the SIA rights on the open market. Does that make me a share/bondholder of SIA?
No. What you have bought is only the rights. You need to pay another $3.00 to convert the rights into SIA shares, or another $1.00 to convert the rights MCB into the bond.
11. Should I exercise my rights and further average down my price in SIA?
With regard to this question, it will very much depend on why you’ve invested in SIA in the first place – is it for short-term trading, or is it for the long-term?
If it is the former, then you need to ask yourself what is your trading plan when you bought SIA in the first place – particularly your profit target price, and your stop-loss target; especially if it has hit the latter, then the next question you need to ask yourself is why are you still holding on to the shares of the company.
However, if it is the latter, then you need to ask yourself why is it you have decided to invest in SIA in the first place, are the reasons for investing in Singapore’s national carrier still valid today, and most importantly, your thoughts about the present management’s ability to navigate the company through the headwinds, and eventually restore it to its previous glory.
By answering the questions above, it will more or less give you a very clear picture as to what you should do with your present SIA holdings, and also the rights issue you have at hand.
12. Will I be exercising my SIA rights MCB?
No I will not be exercising my SIA rights MCB. The reason is because I am not comfortable with the fact that it does not pay out any coupons over the entire 10 year period, and also the fact that 10 years is too long for me.
But having said that, to each their own. Please do your own due diligence.
13. If I am not a shareholder of SIA currently, is it a better option for me to buy the rights and exercise it to become a shareholder, or should I buy the mother share directly?
At the time of writing, SIA’s rights are trading at S$0.710. Together with another $3.00 you will have to pay to convert each right into SIA share, the total price you will be paying to invest in SIA will be S$3.71.
The mother share (under the ticker code “C6L”) is currently trading at S$3.80.
Personally, if the price difference is not too big, and if I do not have any SIA shares and would like to invest in the company, I will just buy the mother shares. However, the choice is yours to make.
Disclaimer: At the time of writing, I am a shareholder of Singapore Airlines Limited.
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